Taking into consideration discrepancies in the interpretation and application of tax law provisions, taxpayers may seek official rulings regarding the interpretation of these provisions. There are two types of tax rulings: general and individual. A general ruling is a letter from the Minister of Finance containing an interpretation of tax law provisions in the context of discrepancies arising as a result of the application of these provisions by subordinate tax authorities. The doctrine indicates that general rulings are not binding for anyone, whether tax authorities, taxpayers, tax remitters, or tax collectors. An official ruling cannot provide the basis for tax decisions issued against citizens and other legal entities. However, compliance with such a general ruling by the taxpayer, who is not formally obliged to do so, results in the taxpayer being covered by legal protection by the mere fact that they have acted in reliance on the position set out in an official ruling. A similar effect occurs if such a ruling is not taken into account in the resolution of a tax case by the tax authority.
Individual rulings are instruments issued, against payment, by the Director of the National Revenue Information Service, which contain an interpretation of tax law provisions in the context of an individual factual background or a future event which concerns the applicant directly. The objective of the institution of an individual tax ruling is to mitigate the risk associated with the fulfilment by a taxpayer or a tax remitter of the rights and obligations under tax laws, in particular the obligation to self-calculate and pay due tax. It follows from the substance of the ruling that it does not produce binding legal effects for the person concerned. Compliance with the ruling depends on the will of the person concerned. Importantly, for the protection resulting from tax rulings, it is relevant that the factual background/future event presented in the application and the one that actually occurred be identical, and that the obligations resulting from the content of the ruling issued be fulfilled. As such, an individual tax ruling affords protection to any applicant provided that they comply with the same. However, a taxpayer cannot derive such protection from a ruling issued at the request of their counterparty. As regards general rulings, any entity in the situation described in the ruling is in a position to comply with the ruling.
Legal protection resulting from tax rulings is connected with the structure of the “do no harm” principle (Articles 14k to 14m of the Tax Ordinance) whose scope of application is quite narrowly understood. Legal protection of the entity benefiting from a general ruling and the addressee of an individual ruling means that, to the extent of acting in compliance with a ruling that has been amended, or declared expired, or a ruling that has not been taken into account in the resolution of the tax case, criminal fiscal proceedings are commenced against such persons, any proceedings instituted in these cases are discontinued and interest is not charged. However, these persons are essentially still required to pay tax as the tax obligation results from the law which is not affected by the ruling. However, in certain cases, the guarantee function of tax rulings will also include a tax exemption – this will apply to a situation in which a ruling was the reason for a specific entity to take specific steps affecting the factual background. A ruling may have such an impact on improper performance of the obligation where the event being the subject of the ruling has not yet occurred at the time of publishing a general ruling, or serving an individual ruling. The following conditions must therefore be met: the obligation has not been properly performed as a result of compliance with the ruling that has been amended, or the ruling that has not been taken into account in the resolution of the tax case and tax consequences related to the event which corresponds to the factual background being the subject of the ruling, arose following the publication of the general ruling or following the service of the individual ruling.
Legal protection resulting from tax rulings does not apply if the tax authority finds, after the ruling has been issued, that the factual background or the future event being the subject of this ruling is part of the activities being the subject of a tax avoidance decision or a decision issued in connection with the abuse of right, or activities that may be the subject of a decision issued with the use of measures curbing contractual benefits.